Whether we believe it or not, scammers and fraud are everywhere. Where there is money to be made, scammers continue to linger in the shadows. Credit card scams, pet adoption scams, insurance scams, if money is involved, scammers are not far behind. Real estate and mortgage fraud began in the early 2000s, but as technology and easier access have risen, it has only gotten worse. In a state like Arizona where vulnerable demographics make up much of the population, knowing how to screen for scam offers and situations is crucial. As acquiring cash for homes is a rising sale option, there are a few things to be aware of if one is trying to sell their home for cash without crossing a scam operation.
John Rowan, one of our home assessors, investors, and Licensed Realtors, was recently brought into light for his undercover work on a major scam with the Scottsdale Police Department. Two local women posed as owners of a paid home, changed the locks, and held open houses for interested buyers. All while the senior aged owner was living elsewhere out of state. The women falsified deeds, including using identical handwriting for the deed signer and the notary. An instant red flag. Along with evasive, questionable behavior from the two women, they listed the property looking for a fast, cash-only closing to further pressure interested buyers. John was approached by the two women to sell the home, and after reviewing the documents at bay, he knew there was multiple red flags. John contacted the real homeowner, all while keeping in contact with the fraudulent sellers, and then including the Scottsdale Police Department. Trusting his instincts and decades in the business, he agreed to settle a deal with the women for a large six-figure deal, provided and deposited within the next 48 hours. When John accepted the $400k offer and arranged for the fraudulent sellers to meet with him, he had the Scottsdale Police by his side ready to approach and apprehend. The two women remain in Maricopa County custody. With more sellers choosing to go the cash for homes route, there are plentiful things to be on the lookout to prevent scams such as the case above where John was able to stop.
A common scam is a ‘wholesale daisy chain’. In a legitimate wholesale transaction, a single wholesaler will contract a home from a seller and then assign that contract to a final buyer (usually an investor) where the wholesaler will make a fee from assigning a contract. In a daisy chain scam, this process happens repeatedly; each wholesaler tweaks the price, adding a major increase to the final price. When selling your home with Quick Cash, not only will John Rowan be your wholesaler, but also your investor. No room for scams or middlemen with John taking over the whole operation. If the cash sale for your home does happen to include a separate wholesaler & investor, there are ways to avoid the ‘daisy chain’ from happening to you.
What to Look for When Preventing Daisy Chain Scams
- Checking buyers reviews on the BBB, along with their transaction history
- Insisting on proof of funds
- Never pay upfront fees
- Using a trusted title company
- Verify all communication by email and phone
Another common scam is when a buyer shows fake proof of funds. This happens when a buyer provides falsified bank statements, pay stubs, or any falsified financial information to trick sellers into contracts, with no lawful money to complete the purchase. When fraudulent buyers roll with this scam, there are a couple of main goals they are attempting to achieve. Often, they are looking to tie up the property and try to find a real buyer to assign the contract to, which when ends in failure, wastes much of the seller’s time. Fraudulent buyers also most likely will attempt to facilitate other scams. Once the trust is established, the scammer is more likely to introduce secondary scams such as a title scam, or overpayment scams where a fake check is sent for more than asking price, then asking for a refund on the difference.
What to Look for When Preventing Fake Proof of Funds Scams
– Honest, legitimate cash buyers will never ask a seller for money for processing, administrative costs, nothing whatsoever before the closing
– Review all documents sent over as most scammers make excuses or provide altered documents or screenshots instead of official, spell corrected, verifiable statements from financial institutions
– If a buyer is pressuring you to sign a contract immediately, with negative connotations about consulting an attorney or real estate agent
– If the buyer has no legitimate presence online, or a physical address
– If the offer seems too good to be true, it is most likely. Trust your instincts if something about the transaction seems off or incorrect.
Lowball switch-and-bait scams are easily the simplest and most common scams when selling your home for cash. Scammers are attracted to sellers who are living out of state, inherited an estate, facing foreclosure, anyone who may accept a lower offer just to be done with their property at hand. These scams start with a decent offer; a fraudulent buyer makes the seller a strong cash offer, something way too good to pass up. Once the seller accepts the offer, the home is taken off the buyers’ market, preventing other offers from coming in. As a week or two passes, even days before the closing, the buyer may claim, “these repairs are going to cost more than we expected”, “our investor changed their mind”, or even “the home didn’t appraise right”, which is not applied with real cash buyers even though scammers will say it anyway. The fraudulent buyers will then demand a seller lower their price to a significant amount, over tens of thousands of dollars. In some of the most extreme cases, fraudulent buyers may even hold the belongings of the seller or threaten to cancel their deal. For a seller who has had their home off the market for a good amount of time, this can force a seller into a corner. Maybe there are moving deadlines or employment deadlines; leaving the seller landlocked in place.
What to Look for When Preventing Lowball Bait-and-Switch Scams
- Noticing when offers are too good to be true, much more than others
- Claiming your property is worth a large amount of money, then saying it is worth dramatically less than similar or lesser properties
- Constant changing of the price of the property no matter what
- Assuring a fast close, but constantly delaying the process
- Knowing the true value of your property
Lastly, another very well-known scam is when out-of-state buyers with no ability to close on a cash home offer contact a seller. As this scam can vary, most scammers aim to lock in a property with a contract, commit check fraud, or engage within wholesaling schemes without a legitimate buyer, or lawful funds. There are three common variations of this scam.
The No Cash (Time Waster) is where the buyer signs an agreement with a cash offer, lacking the actual funds and providing fake proof of funds, or no applicable funds to buy the property. The goal of the scammer is to find a legitimate buyer after the contract had been signed, when scammers fail to find a buyer, they will back out which prevents the seller from finding a real buyer, marketing the property, and overall, a waste of the sellers time.
The Overpayment scam happens when the buyer sends a fraudulent check of more than the agreed-upon price, asking the seller to wire back the remainder of the money for a third party. Whether this third party is for movers, help with relocation, or someone involved with the selling / buying process, the check will bounce after the seller has already wired their funds.
The Fake Escrow or Title Company scam happens when scammers insist on using their own title or escrow company to facilitate the selling. More than likely, the company is non-existent, or a fraudulent company used to steal funds or information from the seller.
What to Look for in Out-of-State Buyer Scams
– Most of the time, an investor or wholesaler interested in the property will come and look at the property. Especially if they are near to the property. It is extremely common for scammers who are not genuinely interested to not look at the property
– No legit buyer will ask for application, processing, or appraisal fees
– The buyer avoids phone calls, voice calls, or video chats
– Anytime the buyer requests to handle money outside of reputable, licensed third party title or escrow companies are a scam
– Asking to receive a property deed or title early on
As a homeowner, if you are remotely interested in selling your property for cash at any point, there are many red flags to watch for. The scams noted above are extremely common with the rise in people selling their homes for cash. Being aware of scams such as these can help prepare the seller for any possible fraudulent cases involving selling their home in the future regardless of selling for cash, or traditional listing.